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August 2, 2018

Safrinha Corn Production in Brazil continues to Disappoint

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Farmers in Brazil continue to express disappointment in their safrinha corn yields. Nationwide, the safrinha corn harvest has passed 50% complete with the state of Mato Grosso leading the way with over 80% harvested.

The most recent company to lower their estimate of the safrinha corn production was INTL FCStone. They now estimate that the safrinha crop will total 53.4 million tons, or a reduction of 9.2 million tons compared to 2017, which would represent a reduction of 19%. They feel the reduced production will be reflected in reduced corn exports.

Conab is currently estimating Brazil's safrinha corn production at 56.0 million tons and it is possible that they will lower their estimate in their August Crop Report, which is due out next week. Conab is estimating Brazil's total 2017/18 corn production at 83.0 million tons and that too may be reduced next week. The USDA is currently estimating the total Brazilian 2017/18 corn production at 83.5 million tons.

The reduced production and slow marketing by farmers have resulted in improved domestic corn prices in Brazil. In fact, Brazilian corn is now more expensive than corn from the United States or Ukraine.

The lack of certainty surrounding freight rates in Brazil is also contributing to slow marketing of the corn. Domestic corn prices have improved in recent days, but they are still below prices of a month ago. Even with the small improvement in price, margins on corn are tight due to the higher cost of freight to transport the corn to export facilities. Grain companies must offer farmers less for their corn in order to cover the higher cost of transportation, estimated at 20% to 40% higher compared to several months ago. All the freight charges in Brazil are supposed to be at the minimum set by the government or higher, but there are reports that some freight is occurring at below the official minimum rate.

Mato Grosso is the number one safrinha corn producer and even though the harvest has passed 80%, farmers in the state have only sold about 50% of their crop. Some of the grain silos in the state are still filled with last year's soybean crop, forcing grain elevators to pile the recently harvested corn on the ground.

The Mato Grosso Institute of Agricultural Economics (Imea) estimates the safrinha corn production in the state at 26.4 million tons compared to 30.4 million tons produced last year.

The current price for corn in the city of Sorriso, which is located in central Mato Grosso, is in the range of R$ 20.00 per sack (approximately $2.45 per bushel). Soybean prices are in the range of R$ 64.00 to R$ 65.00 per sack (approximately $7.86 to $7.98 per bushel). At these price levels, margins for soybeans are better than they are for corn.

All the corn in Mato Grosso is produced as the safrinha crop, but in southern Brazil, farmers still plant some of their corn as the full-season crop planted at the same time as soybeans. At these price ratios, it is possible that Brazilian farmers will continue to reduce their full-season corn acreage in favor of soybeans and shift more of their corn production to the safrinha crop.